A new proposal for coronavirus rebound

The $8 billion emergency spending bill to deal with coronavirus includes $3 billion that can be used for the research and development of a coronavirus vaccine or treatment. There’s a better way: The U.S. government should take advantage of the recent stock market plunge to incentivize firms to develop a coronavirus cure, vaccine, or other approaches.

We call this proposal the Epidemic Market Solution or EMS. The government should offer each of 10 firms stock options worth ten billion dollars if the Dow Jones increases by 15 percent over the next six months, and maintains that average increase over a month.

A coronavirus cure or vaccine would generate such an increase. For example, if a firm has $10 billion in options based on index funds, and a new cure or progress towards a cure causes the stock market to rise by 15 percent, the firm would make a profit of $1.5 billion. An even better response might be an increase in the market by 20 percent; in this case, the firm would make a profit of $2 billion.

That is from my old colleagues Linda Cohen and Ami Glazer at UC Irvine, and yes that is the Ami Glazer of Glazer’s Law.  Here is the full proposal.

Comments

What could possibly go wrong?

++ the naissance of public goods pricing

Can you catch Corona virus from anal sex?

I mean I guess this is clever but there doesn't really seem to be any serious doubt we're going to get a vaccine. As far as I can tell they already have multiple candidates that will probably work, just a shit ton of testing and manufacturing at scale to ramp up. I guess we could try to incentive that stuff happening sooner.

One thing that is not clear to me is if there is any mechaism for vastly ramping production of candidates in parallel with the testing/trial process. Make millions of doses of a few different candidates while the animal/human trials are run, then turn them loose once you've verified the solution. Maybe you waste a few billion on so on bad bets but many well spent if you can deploy vax in volume a few months earlier.

How much more effort is needed? The US, Canada, China, Israel, and other countries are already on it. At least 30 treatments are already in the pipeline. The US should buy stocks for sovereign wealth and general welfare reasons similar to the oil strategic reserve instead of this scheme.

https://en.wikipedia.org/wiki/COVID-19_vaccine

So what's the incentive again? Firm has an option that will pay off dramatically if the stock market goes up. They will invent a vaccine/cure/treatment to make the market go up.

Why aren't hedge funds and mutual funds doing this then?

The why is simple - they are far too busy chasing unicorns to be bothered wasting their money on something like this.

Sorry, your idea would work in a vacuum. NOT in the real world.

Doesn't this assume that the time to a cure has a linear correlation to money spent?

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